Commodity Weekly (December 14 2020)

It is difficult to believe given the year that is now largely over, that oil broke $50/bbl this week. While there has undoubtedly been action on the supply side to help achieve this, it is nonetheless an amazing feat.

In any market price there is always an element of kidology and hubris, and the current pricing environment is no different. Perhaps the more sanguine view can be taken from the forwards, which are largely flat out to 2027, underlining the real uncertainty that is permeating the market currently.

While the current view for 2021 is positive, given that the global economy effectively shut down over parts of 2020, saying that 2021 is going to be better than this year is hardly anything startling. The question is whether that momentum can continue into 2022, and crucially how much further beyond.

With vaccinations in the US and the UK starting in earnest this week, there is going to be a six-month hiatus before we can get a clear picture of what impact the programme will have. The crucial thing here is that we don’t need it to deliver before we can start living a “normal” life, once the efficacy of the respective vaccines has been proven amongst the vulnerable groups, we can start to move away from Covid-19

Consequently, the die has been cast on the outlook for the next 18 to 24 months, and now it is time to see if life will return to normal on the back of a vaccine, or whether it will be Covid fatigue.

This week’s Commodity Week is the last until January 2021, so we just like to take this opportunity to wish everybody a Merry Christmas and a happy New Year; may 2021 bring us all better fortune.